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Migrants have kept interest rates down

IMMIGRATION into Britain has eased pressure on the labour market and allowed interest rates to be lower than they would have been, according to a new analysis.

The Ernst & Young Item club, which uses the Treasury’s model of the economy, suggests that the increase in net migration into Britain in recent years has reduced interest rates by half a percentage point and that the effect is likely to grow to one percentage point.

This net migration, which reached 223,000 in 2004 — the latest year for which figures are available — has allowed employers to fill jobs more easily. A recent government analysis concluded it had not taken jobs from British workers. Now the Item club suggests the effects have been beneficial.

“We are on the crest of a new immigration wave,” said Peter Spencer, chief economic adviser to the Ernst & Young Item club. “The steady flow from the most